Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Before Income Taxes

Polaris’ Income before income taxes was generated from its United States and foreign operations as follows (in thousands):

	For the Years Ended December 31,
	2012		2011		2010
United States	$	458,635	$	329,060	$	210,155
Foreign		21,208		17,566		8,386
Income before income taxes	$	479,843	$	346,626	$	218,541

Components of Provision for Income Taxes

Components of Polaris’ Provision for income taxes are as follows (in thousands):

	For the Years Ended December 31,
	2012			2011			2010
Current:
Federal	$	169,833		$	113,406		$	73,597
State		15,366			10,629			7,381
Foreign		8,593			6,374			6,783
Deferred		(26,259	)		(11,358	)		(16,358	)
Total	$	167,533		$	119,051		$	71,403

Reconciliation of Federal Statutory Income Tax Rate to Effective Tax Rate

Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows:

	For the Years Ended December 31,
	2012			2011			2010
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		1.8			1.8			1.8
Domestic manufacturing deduction		(1.5	)		(1.9	)		(1.8	)
Research tax credit		0.0			(0.8	)		(1.2	)
Valuation allowance for foreign subsidiaries net operating losses		0.0			0.5			0.4
Other permanent differences		(0.4	)		(0.3	)		(1.5	)
Effective income tax rate		34.9	%		34.3	%		32.7	%

Net Deferred Income Taxes

The net deferred income taxes consist of the following (in thousands):

	December 31,
	2012			2011
Current deferred income taxes:
Inventories	$	7,277		$	5,968
Accrued expenses		78,164			73,171
Derivative instruments		851			(1,474	)
Total current		86,292			77,665
Noncurrent net deferred income taxes:
Cost in excess of net assets of business acquired		5,193			2,139
Property and equipment		(21,656	)		(21,627	)
Compensation payable in common stock		40,329			31,274
Net unrealized gains in other comprehensive income		(1,698	)		(1,516	)
Net operating loss carryforwards		4,744			4,243
Valuation allowance		(4,523	)		(3,912	)
Total noncurrent		22,389			10,601
Total	$	108,681		$	88,266

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	For the Years Ended December 31,
	2012			2011
Balance at January 1,	$	7,837		$	5,509
Gross increases for tax positions of prior years		83			483
Gross decreases for tax positions of prior years		—			—
Gross increases for tax positions of current year		1,137			1,956
Decreases due to settlements		(1,994	)		—
Decreases for lapse of statute of limitations		—			(111	)
Balance at December 31,	$	7,063		$	7,837